Maple extends bid for Canada's TMX Group; to buy Alpha

Jennifer Kwan, Euan Rocha

4 Min Read

TORONTO (Reuters) - The consortium of Canadian financial institutions bidding for the operator of the Toronto Stock Exchange extended its offer for a seventh time on Monday and announced two deals that will help it realize an ambitious plan to transform Canada’s stock trading landscape.

Luc Bertrand, Maple Group spokesman and vice-chairman of National Bank Financial poses for a photograph in Toronto, July 6, 2011. REUTERS/Mark Blinch

Prolonging its C$3.8 billion ($3.85 billion) bid for TMX Group (X.TO) to May 31, Maple Group said it had reached agreements to buy Alpha Trading Systems, Canada’s second biggest stock trading venue, and the Canadian Depository for Securities Ltd clearing system.

It will pay C$175 million for Alpha, owned in part by Canada’s big banks, and C$167.5 million for CDS, it said.

“These agreements are important milestones in our effort to realize our vision for a stronger and more globally competitive exchange and clearing organization,” Maple spokesman Luc Bertrand said in a statement.

Maple, whose 13 members include most of Canada’s biggest banks as well as pension funds, a giant insurer and other financial groups, has repeatedly said its bid is contingent on winning regulatory approval for wrapping in Alpha and the CDS.

That will create an exchange with some 85 percent of Canadian stock trades.

Critics have argued that the deal would concentrate too much power in the hands of a single player, creating a near monopoly of stock market trading and clearing operations. TMX shares have consistently traded below Maple’s C$50 a share offer amid doubts about whether anti-trust authorities will okay the deal.

TMX shares closed up 40 Canadian cents, or 0.9 percent, at C$45.10 on the Toronto Stock Exchange on Monday. News of the extension of the offer came after the market closed.

The buyers now are waiting approvals from several provincial regulatory bodies and from the federal Competition Bureau, which has said it as “serious concerns” about the proposal.

But in a statement that prompted speculation that the bid could be a step closer to completion, Maple said on Friday that draft rules to be issued by the Ontario Securities Commission might “substantially mitigate” Competition Bureau concerns.

The OSC says the draft recognition orders, explaining terms and conditions under which it could approve the deal, are expected shortly.

Maple also requires approval from regulators in British Columbia and Alberta. Both are expected to issue notices, although it is unclear which way they’re leaning in the approval process.

TMX said it will support the friendly bid until July 31 if needed, and will work with Maple to win regulatory approval.

“Chances are we have a deal here and indeed it will proceed,” said Thomas Caldwell, who is Chairman of Caldwell Financial and a TMX shareholder.

Maple first put in its bid almost a year ago, as a hostile alternative to a friendly offer from the London Stock Exchange(LSE.L). It said it intends to complete the proposed acquisitions of CDS and Alpha at the same time as the close of its offer for the TMX, or as soon as possible after that.